Citizen Reporter
3 minute read
22 Mar 2020
2:39 pm

The DA calls for temporary postponement of business loan payments due to Covid-19

Citizen Reporter

The party says the announcement by Standard Bank of a 3 month payment holiday on all up-to-date business loans is very welcome amid the Covid-19 outbreak.

A glass sculpture entitled "coronavirus – COVID-19" created by British artist Luke Jerram is seen at his studio in Bristol, southwest of England on March 17, 2020. Jerram has created a coronavirus – COVID-19 – glass sculpture in tribute to the huge global scientific and medical effort to combat the pandemic. Made in glass, at 23cm in diameter, it is 1 million times larger than the actual virus. (Photo by ADRIAN DENNIS / AFP)

The Democratic Alliance (DA) has called on banking institutions in South Africa to emulate Standard Bank and implement a “business loan payment holiday” in the wake of the Covid-19 outbreak.

The DA’s Geordin Hill-Lewis said: “The announcement by Standard Bank of a 3 month payment holiday on all up-to-date business loans is very welcome. The DA calls on all other banks to match this relief intervention as soon as possible.”

Hill-Lewis said the DA calls for a loan forbearance programme since the national disaster was declared in the wake of the Covid-19 outbreak.

“And we are pleased that this request has been heeded. We now need to see this rolled out by all other banks and loan-making institutions.

“This business loan forbearance, if it is matched by all banks, will give much-needed relief to struggling businesses and families. It will give our economy the breathing room it needs to survive the next few months,” Hill-Lewis said.

Hill-Lewis said it is, however, concerning that the government has not co-ordinated a nation-wide loan forbearance programme proactively, “and has instead left it up to individual banks to make these announcements”.

“This does not inspire confidence that the government has a firm grip on the economic disaster we face, or that they have any plan to help get our economy through this crisis.

“The uncomfortable truth is that the government is unable to decisively intervene to save the economy now, because it has no money, and no ability to raise more debt, following a decade of economic mismanagement,” Hill-Lewis said.

Hill-Lewis said the DA’s suggestions is a comprehensive economic ytsupport package, which should include:

  • Free up funds for disaster management:

At this time, it is unthinkable that redundant SOEs like SAA will receive a bailout of R16.4 billion, as is proposed in the current budget, while the health budget is to be cut by R3.9 billion.

This SAA bailout should be cancelled immediately and the budget amended to allocate this money to disaster relief, and to provide for the essential equipment that our health officials will surely need in the coming weeks.

  • Loan forbearance:

For the economic survival of small businesses, we propose a nation-wide four month payment holiday on loans for small and medium businesses, in particular property loans, business loans and vehicle loans. Now that this proposal has been announced by Standard Bank, we call on other banks to match it.

  • Rental forbearance:

Most small businesses operate from rented premises. Landlords can often not afford to relax these rental payments, because the properties themselves are bonded. If a loan payment holiday programme is enacted, then rental payments can also be paused for four months to help businesses survive.

There are of course some property owners who rely on the income from their properties, even if they are not bonded. In these cases, a pause in rental payments, or a reduction in rental payments, would need to be negotiated on a case by case basis. Even so, it would still help for the government to make a statement calling on owners to demonstrate forbearance wherever possible.

  • Raise in VAT threshold, and pause in UIF and Worker’s Compensation Fund payments:

The Department of Labour has announced a pause on payments for UIF, which we welcome, but this must be extended to include payments for the Worker’s Compensation Fund by small businesses for four months, without affecting workers’ cover under the fund. Many businesses pay tens of thousands of rands to these funds, and this money would be valuable cash flow support to those businesses during this time. Payments could be recouped when the economy rebounds.

The Compensation Fund currently has R50 billion in assets, and pays out roughly R4.5 billion in claims each year. Our assessment is that The Fund could absorb a single payment deferment this year.

Now is also the time to raise the VAT threshold for small businesses, from R1 million to R2 million. This would give immediate relief to small businesses.

(Compiled by Makhosandile Zulu)

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